The crypto market is currently in turmoil after the revelation from Circle (USDC issuer) that Silicon Valley Bank failed to transfer $3.3 billion worth of its USDC reserves. This led to the stablecoin losing its dollar peg, with investors unable to walk away with their USDC assets.
Selling USDC For Other Stablecoins
Meanwhile, some USDC investors have reportedly started selling their tokens in exchange for other assets like Tether’s USDT. However, not all investors are lucky to have evaded the cash crash as a Crypto Twitter member detects a shocking transaction from a USDC investor.
He said the USDC investor paid over $2 million to receive $0.05 USDT. Furthermore, an on-chain observation shows that the trader stored the funds in a liquidity pool (LP) to yield returns.
The user, as reports indicate, would have sold his LP tokens for USDT stablecoins at a 6% slippage rate. However, as the Crypto Twitter commenter revealed, the trader adopted a questionable method.
Given that the crypto market is in a crisis and the race against time, the trader reportedly forgot to redeem his slippage. It is worth noting that slippage allows investors to set the token’s price before any transaction can go through.
According to the Crypto Twitter member, the USDC investor committed two avoidable blunders. First, the user must clearly understand slippage and how to set up slippage. Second, the user set the router to move a $2 million transaction via a defunct UniSwapV2 having $2 liquidity.
As a result, the Twitter commenter stressed that the above episodes show how human errors can lead to permanent loss of money in the crypto industry. Before cashing out stablecoins for fiat or other crypto tokens, investors should be able to cross-check the information and the transfer method.
The Stuck $3.3 Billion USDC Reserves
In a recent statement on Friday, Circle, the USDC stablecoin issuer, revealed that it failed to move its $3.3 billion reserves from the Silicon Valley Bank after the latter was in the middle of a US banking crisis. The latest development comes after the crypto market dipped on Thursday, March 10, following the collapse of Silicon Valley Bank and Silvergate Bank, two crypto-friendly banks.
Furthermore, the stablecoin issuer noted that all its efforts to remove its balances from the troubled bank failed. Hence, the firm’s $3.3 billion cash reserves remain stuck with the bank.
In a follow-up press release, Circle noted that, like other entities that rely on Silicon Valley Bank for its services, it is greatly impacted by the banking crisis that has crippled the bank’s operation. Circle had reportedly revealed that the bank was one of its six banking partners that held roughly 25% of its stablecoins reserves.
Other banking partners include Signature Bank and Silvergate Bank. The latter recently revealed that it is considering liquidating. Despite the turbulence, Circle noted that its operation is unaffected as it continues doing business seamlessly.
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